Workers compensation insurance, also known as work cover, is one of the most important types of cover for businesses with employees in Australia. It’s designed to protect workers financially if they’re injured or fall ill as a result of their work.
Whether you’re running a small business with one or two other people or a large company with hundreds of employees, having cover in the event of an accident or illness is essential, both for you and your workers.
What does workers compensation insurance cover?
Workers compensation insurance covers employees in the event that they suffer an injury or illness because of their work. This cover comes in two main forms:
- Cover for lost wages while they’re unable to work
- Cover for medical and rehabilitation costs related to the treatment of their injury or illness
According to Safe Work Australia, if an injury or illness causes permanent disability or impairment, workers compensation insurance can pay a lump sum to the employee. If a work incident causes death, it can not only pay out a lump sum to the employee’s family but also ongoing benefits to their dependants and cover funeral expenses.
All coverage will ultimately depend on the nature and severity of the injury or illness and is subject to your insurer’s terms and conditions.
Is workers compensation insurance the same as public liability cover?
No – public liability cover is a different type of business insurance. Here’s what can be included under a public liability insurance policy:
- Compensation for personal injury caused to a third party due to your business activities
- Compensation for property damage caused to a third party due to your business activities
- Cover for legal costs associated with defending a claim in court
Public liability insurance doesn’t cover injury or property damage suffered by your employees due to your business activities. This insurance also isn’t mandatory for all employers, except in some states and territories for certain professions.
When is workers compensation insurance mandatory?
If you’re a business owner in Australia that employs at least one other person, workers compensation insurance is mandatory. This is always the case for employers and there’s no way around it.
If you’re a sole trader, however, there’s no need for this cover. A workers compensation policy won’t offer the protection you need if you suffer an injury or illness on the job. In this case, you’ll need to have income protection insurance, trauma insurance or TPD insurance (or a combination of more than one) to cover yourself.
This is also the case for contractors, who may not be covered under a workers compensation policy. Neither of these is compulsory but can bring much-needed peace of mind to sole traders and contractors.
Who offers workers compensation insurance in my state or territory?
There are different insurers and regulators offering workers compensation insurance across Australia. Here’s what it looks like where you live:
| State/territory | WCI regulator | WCI provider/s |
|---|---|---|
| Australian Capital Territory | WorkSafe ACT |
|
| New South Wales | State Insurance Regulatory Authority | icare, with claims managed by:
|
| Northern Territory | NT WorkSafe | Insurers:
Self-insurers:
|
| Queensland | WorkSafe Queensland | WorkCover Queensland, with an additional long list of self-insurers |
| South Australia | ReturnToWorkSA | Employers Mutual and Gallagher Bassett are the two approved claims agents |
| Tasmania | WorkCover Board Tasmania |
|
| Victoria | WorkSafe Victoria | WorkSafe Victoria (WorkCover insurance), with approved claims agents:
|
| Western Australia | WorkCover WA |
|
| Information correct as of May 2025. | ||
How much does workers compensation insurance cost?
The way workers compensation cover works is that you’ll pay a percentage of your employee’s salary to your insurer. This percentage is different based on where you live, ranging from 1.29% in Queensland to 2.1% in the ACT in the 2023-24 financial year, according to tax strategy firm Pherrus.
However, beyond your location, there’s a range of factors that impact the cost of your workers compensation insurance. These include:
- Your employees’ wages: naturally, the higher the wages you’re paying your workers, the more it’ll cost to cover them if they make a claim.
- Your industry: not all industries pose the same level of risk. For example, a construction business carries a higher risk to employee safety than a call centre.
- Your claims history: if your business has a record of multiple claims in recent years, you’ll pay more than an equivalent business with no claims.
- Minimum required premium in your state or territory: some governments will set a required minimum premium. For example, in SA in the 2024-25 financial year, the average premium cost was 1.85% but the cheapest available workers compensation premium was only $200 annually.
Workers compensation claim – example
Darren works for a construction company. One day, while working on a job site, a block of concrete falls on his foot. It’s badly broken and requires surgery. His doctor tells him that he’s looking at a recuperation period of at least two to three months, during which time he won’t be able to work. He’s provided with a certificate of capacity, which is an official document that states that you’re unable to work.
Darren lets his employer know that he intends to file a workers compensation claim. They provide him with the necessary forms to submit his claim, which he does promptly. His insurer gets back to him and approves the claim. As a result, his full wage is covered for the duration of his recovery, as are his hospital costs and all other rehabilitation expenses.
Not only does Darren walk away with all costs covered and not a cent out of pocket, but his employer dodges a bullet too. Without adequate cover, they’d have to potentially fork out tens of thousands, if not hundreds of thousands, on the full cost of compensation.
